Blogs/Vlogs

Massive increase in probate fees announced

28 February 2017

Just over a year ago, I wrote about proposals from the Ministry of Justice for a significant increase in probate fees. The idea met with opposition from professional bodies that bordered on outrage and a formal consultation produced a response that was overwhelmingly negative. The government has decided to press ahead anyway.

The new fees will come into effect this May on a date yet to be announced (it is assumed that a cut-off will apply by reference to date of death although this is not certain). Under the current system there is no fee payable if you wish to obtain probate in respect of an estate with a net value of less than £5,000; above this level there is a fixed fee of £215 if the application is made in person or £155 if it is made by a solicitor or accountant on behalf of the personal representatives. The new system will exempt estates with a value of up to £50,000 from probate fees (a welcome move). Above that level, however, the fee will increase in steps according to the value of the estate. From a relatively modest starting point of £300, the fee will rise such that for an estate worth between £500,000 and £1m (a band that many will fall into given current property prices) it will be £4,000. For an estate worth between £1.6m and £2.0m the fee will be £12,000. For all estates worth in excess of £2.0m the sum to be found will be £20,000.

This new “stealth tax” is expected to raise in excess of £250m per annum. It is in effect an increase in the rate of inheritance tax, but with the nasty twist that it is payable even if there is no inheritance tax liability. As with the initial payment of inheritance tax, personal representatives will have to fund the payment of the fee before they have access to the assets of the deceased. It is to be hoped that banks and building societies will agree to release funds to cover the fee where the deceased had a sufficient balance on deposit, but there will inevitably be cases where personal representatives will have to borrow in order to obtain probate.

If you expect your estate to be worth in excess of £500,000 (at which point the new fees jump from £1,000 to £4,000) you should take advice. We believe that in many cases it will be possible to plan such that the fee is reduced or even eliminated, but care must be taken (and the elderly/vulnerable should not be pressurized into taking steps that might have implications for their financial security). Where such planning is not an option and the estate is likely to attract a significant charge, individuals may wish to think about leaving an appropriate sum such that it will be accessible to their personal representatives.

Unpleasant and unwelcome as the fee increase is, it should not be seen as a reason to cut corners and save money on the administration of an estate. The role of personal representative should not be taken lightly – you have responsibilities to the courts and to HMRC (there are significant penalties for submitting inheritance tax accounts) and you are legally accountable to the beneficiaries of the estate. Professional advice should be taken in all but the most straightforward of cases.

If you would like advice on your personal situation please contact me, your usual UHY Hacker Young contact or find details of your nearest UHY office here.  For more about our probate services, see here.

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